<PAGE>

                                                                    EXHIBIT 4.16






                                                              August 4, 2004



<TABLE>
<S>                                                         <C>
Capital Z Financial Services Fund II, L.P.                  Reservoir Capital Partners, L.P.
54 Thompson Street                                          c/o Reservoir Capital Group, L.L.C.
New York, NY 10012                                          650 Madison Avenue, 26th Floor
                                                            New York, NY 10022
Capital Z Financial Services Private
    Fund II, L.P.                                           Reservoir Capital Master Fund, L.P.
54 Thompson Street                                          c/o Reservoir Capital Group, L.L.C.
New York, NY 10012                                          650 Madison Avenue, 26th Floor
                                                            New York, NY 10022
RER Reinsurance Holdings, L.P.
777 Main Street, Suite 2250                                 Robert M. Stavis
Fort Worth, TX 76102                                        c/o Bessemer Venture Partners
                                                            1865 Palmer Avenue, Suite 104
SAB Capital Advisors, L.L.C.                                Larchmont, NY  10538
650 Madison Avenue, 26th Floor
New York, NY 10022
</TABLE>


       Re: Certain Preferred Securities of PXRE Group Ltd. (the "Company")

Gentlemen:

         Reference is made to those certain Series A Convertible Voting
Preferred Shares ("Series A Preferred Shares"), Series B Convertible Voting
Preferred Shares ("Series B Preferred Shares"), Series C Convertible Voting
Preferred Shares ("Series C Preferred Shares" and, with the Series A Preferred
Shares and the Class B Preferred Shares, collectively, the "Preferred Shares")
of the Company held by you on the date hereof; the Class A Convertible Voting
Common Shares ("Class A Convertible Common Shares"), Class B Convertible Voting
Common Shares ("Class B Convertible Common Shares"), Class C Convertible Voting
Common Shares ("Class C Convertible Common Shares" and, with Class A Convertible
Common Shares and the Class B Convertible Common Shares, collectively, the
"Convertible Common Shares") into which the respective series of Preferred
Shares are convertible.

<PAGE>

         This letter will serve to confirm that each of you (each, a "Preferred
Shareholder") does not intend to sell any Convertible Preferred Shares or
Convertible Common Shares owned directly or indirectly by you pursuant to the
shelf registration statement on Form S-3 (the "Registration Statement") which
the Company is proposing to file with the Securities and Exchange Commission
(the "SEC") on or about August 6, 2004, to register the Preferred Shares, the
Convertible Common Shares and the common shares of the Company into which the
Convertible Common Shares are convertible (the "Common Shares"), and that, in
consideration of the Company's agreement to register for resale the Preferred
Shares, the Convertible Common Shares and the Common Shares, each of you hereby
agrees to not sell, offer for sale, assign or otherwise transfer to any third
party any of such Preferred Shares (or Convertible Common Shares) in a public
offering pursuant to the Registration Statement without the prior consent of the
Company. Nothing herein shall, nor shall it be deemed to, in any manner
whatsoever, (i) affect the timing of any election by any Preferred Shareholder
to convert the Preferred Shares and the Convertible Common Shares, respectively,
held by any Preferred Shareholder, or to sell the Common Shares issuable upon
conversion of such Preferred Shares and Convertible Common Shares or engage in
any other transaction with respect to such Common Shares or (ii) enter into any
transaction not involving a public offering with respect to the Preferred Shares
or Convertible Common Shares held by any Preferred Shareholder or (iii) enter
into any transaction not pursuant to the Registration Statement, which decision
in the case of clauses (i), (ii) and (iii) shall continue to be made solely in
the discretion of each such Preferred Shareholder; provided, however, it is
understood and agreed that no undertaking referenced in (i), (ii) or (iii) above
is intended to expand the rights of the Preferred Shareholders under the terms
of that certain Investment Agreement dated April 4, 2002 (the "Investment
Agreement") entered into by the Company and the Preferred Shareholders named
therein.

         Each of you hereby acknowledges the fact that this Agreement together
with the specific terms hereof are subject to disclosure by the Company in the
registration statement to be filed with the SEC with respect to the Preferred
Shares, the Convertible Common Shares and the Common Shares, in any current or
periodic report filed with the SEC or in any press release with respect thereto;
provided, however that PXRE shall provide a copy of such disclosure to each
Preferred Shareholder prior to the filing or publication of such disclosure and
shall afford you a reasonable opportunity to provide any comments to such
disclosure.

         This Agreement shall be governed by and construed in accordance with
the substantive laws of the State of New York. This Agreement supercedes any and
all prior agreements (other than the Investment Agreement) with respect to the
subject matter hereof. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument. This Agreement may be
modified only pursuant to a written instrument executed by the Company and each
of the other parties hereto.


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<PAGE>



         To evidence your agreement to the foregoing, please execute each of
five copies of this letter Agreement in the spaces provided below, distributing
a copy to each party hereto.

                                                      Very truly yours,

                                                      /s/ Jeffrey L. Radke
                                                      -----------------------

AGREED TO AND CONFIRMED:

CAPITAL Z FINANCIAL SERVICES
  FUND II, L.P.


By:  /s/ Roland Bernardon
     ------------------------------------------------
     Name:  Roland Bernardon
     Title: CFO


CAPITAL Z FINANCIAL SERVICES
PRIVATE FUND II, L.P.


By:  /s/ Roland Bernardon
     ------------------------------------------------
     Name:  Roland Bernardon
     Title: CFO


RESERVOIR CAPITAL PARTNERS, L.P.


By:  /s/ Craig Huff
     ------------------------------------------------
     Name:  Craig Huff
     Title:  President


RESERVOIR CAPITAL MASTER FUND, L.P.


By:  /s/ Craig Huff
     ------------------------------------------------
     Name:  Craig Huff
     Title:  President


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<PAGE>

RER REINSURANCE HOLDINGS, L.P.


By:  /s/ Richard E. Rainwater by Melissa Parrish
     --------------------------------------------
     Name:  Richard E. Rainwater by
              Melissa T. Parrish,
              Attorney-in-fact
     Title:  General Partner


SAB CAPITAL ADVISORS, L.L.C.


By:  /s/ Scott A. Bommer
     ------------------------------------------------
     Name:  Scott A. Bommer
     Title:  Managing Member


     /s/  Robert M. Stavis
     ------------------------------------------------
           Robert M. Stavis, an Individual


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